Get in before you are pushed out.
Canada has consistently been ranked in the top five countries to live in across the world. With Canada increasing immigration to 350,000 people a year by 2021 and 110,000 permanent residents coming to Ontario (mostly the GTA) every year, the housing demand will continue to rise.
Almost 25% of Canada’s population lives within a 160km radius of Toronto.
It’s simple, you will always need a place to live. Let me help you get into this hot market.
1. Down payment
Conventional mortgage requires a 20% down payment.
You can use a high-ratio mortgage with 5-15% down instead, but you must purchase mortgage insurance to do so.
Minimum amount for down payment according to the Federal Government:
> $500,000: 5% of purchase price
$500,000-$999,999: 5% of first $500,000 of purchase price plus 10% for the portion of the purchase price above $500,000
$1,000,000: 20% of purchase price
Banks usually require the down payment to have been in your bank account for at least 90 days.
2. Know your credit score
Credit is very important in Canada. Always be aware of your credit score. It will help to determine the quality of loan and interests rates you are eligible for.
Credit scores range from 300-900 in Canada; minimum score for mortgage approval is 640.
3. Pre-approval - get qualified for a mortgage
Pre-approval is the maximum amount a bank will commit to loan you in advance. It’s free to arrange pre-approved financing, non-committal, and saves time and stress when buying. You can lock in rates for a certain amount of time. A pre-approval letter will give you an upper hand against buyers without one as you can avoid making a purchase offer conditional on financing.
Talk to a mortgage broker or lender. Interview a few before you decide who to work with.
Some documents you will need: Identification, proof of income (usually pay stubs), proof of funds for a down payment, details of any outstanding credit card debt, and details of any leases/loans (such as car payments, student loans etc.)
Fixed rate mortgage: interest rate stays the same despite fluctuations in bank interest rates (less risky).
Variable rate mortgage: Payments stay the same, but interest rate fluctuates with Bank of Canada’s prime rate. If interest rates go up, more payment goes towards interest. If interest rates go down, more payment goes towards principle. More risk, but usually advantageous as variable rates are generally lower than fixed rates and interest rates have been relatively stable for the past few years.
4. Work with me
Come up with a list of what you must have in your new home and a list of your deal breakers.
I’ll send you new listings that are a match as they hit the market and keep you ahead of your competition.
I can inspect properties with you or I can inspect on your behalf to narrow the number of properties you need to make time to see. I am happy to send video footage or photos of properties to you to help you decide whether to see them in person.
Buyers don’t have to pay a sales representative fee, sellers do.
5. Understand all extra costs
Land Transfer Tax (LTT): municipal & provincial tax based on a blended percentage of the purchase price for the property.
< $55,000: 0.5%; plus
$55,000-$250,000: 1%; plus
$250,000-$400,000: 1.5%; plus
> $400,000: 2%
Bank appraisal fee: the cost of having a professional appraiser evaluate the cost of the home for the lending institution.
Mortgage broker/application fee: the mortgage broker charges a fee for their services, usually a small percentage of the loan.
Legal fees: the cost of hiring a real estate lawyer (either hourly rate or fixed transaction fee) to prepare closing documents and costs of title search and title insurance.
Reimbursement: seller may have prepaid taxes, bills or condo fees. These fees are usually pro-rated and reimbursed to the seller.
Home inspection if you decide to make your offer conditional on a building inspection.
6. Take advantage of the first time home buyers programs:
LTT Rebate: Ontario up to $4,000, Toronto up to $4,475.
FTHBI (first time home buyer incentive) launched in September 2019, aims at making it easier for Millennials to purchase their first home. Must have a household income of less than $120,000 and incentive must be paid back on the earlier of the sale of the home or in 25 years, or can be prepaid at any time with no pre-payment penalty. If you qualify, you apply for a 5% or 10% shared equity mortgage with the Government of Canada.
5% for a first time buyer’s purchase of a re-sale home
5% or 10% for a first time buyer’s purchase of a new construction
You must repay the incentive based on the current fair market value of the property, which could result in paying more than the initial amount borrowed
Home Buyers’ Tax Credit works out to a rebate of $750.
Canadian Government Home Buyers’ Plan allows a first-time homebuyer to borrow up to $35,000 from his/her RRSP for a down payment, tax-free.
7. Recognize market value
View at least 4-10 homes.
Look at comparable properties that have sold recently. Examine their listing prices, sale prices, and time spent on the market.
8. Make an offer
Use the standard agreement of purchase and sale form.
Last page of agreement is a schedule where you can list any conditions you have regarding the purchase such as a financing condition or building inspection.
No rulebook on what to offer. Look at past comparables before making an offer and listen to my advice.
